INFOGRAPHIC | Benchmarking Resources for the Medical Group Workforce

Gain access to critical medical group benchmarking data for the entire health care workforce - including executives, physicians, advanced practice providers and other health care staff

This year more than ever, medical groups require access to critical data-driven insights as they look to address the impact of COVID-19 on workforce compensation and productivity, prepare for the 2021 Physician Fee Schedule changes, and balance the need for competitive total reward programs against pressure on operating margins.

Learn more about SullivanCotter’s growing suite of medical group benchmarking resources for all your workforce needs – including annual compensation data and incentive award opportunities for executives, detailed productivity reporting for physicians and advanced practice providers, and market data by organization size, region, state and more for other health care staff positions.

Our suite of 2021 health care compensation surveys are now open for participation! 

View highlights from the 2020 results to learn more about SullivanCotter's proprietary benchmarking data and resources available to medical groups.

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ARTICLE | 10 Best Practices for the Board's Human Capital Committee

Featured in McDermott Will & Emery's new e-book from its Governing Health series

SullivanCotter's Kathy Hastings, Executive Workforce Practice Leader, and Tim Cotter, Manging Director, have contributed to a new e-book from McDermott Will & Emery entitled Key Agenda Items for Board Committees: A Briefing for Governance and Executive Leadership.

Their chapter focuses on the board human capital committee and the key role it plays in guiding human resources strategies as health care organizations face today's challenges. Human capital is critical to organizational strategy, and the committee should test whether the components of the human capital strategy – namely people, process and technology practices – can sustain the organization.

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INFOGRAPHIC | 2020 Endowment and Foundation Investment Staff Compensation Survey

Featuring data from more than 50 not-for-profit organizations nationwide

This survey offers a comprehensive look into compensation and pay practices for investment staff positions among college and university endowments, private foundations, health care and other not-for-profit organizations. It also includes detailed insight into the chief investment officer position.

View highlights from the 2020 results, including average year-over-year increase in base salary for key investment positions, incentive compensation as a percentage of salary for the chief investment officer position, and investment office size by asset category.

Don't miss your chance to participate - the 2021 survey is now open! The final deadline to submit is February 26, 2021.

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INFOGRAPHIC | 2020 Health Care Staff Compensation Survey

Key considerations for the health care employee workforce during COVID-19 and through 2021 and beyond

Employee compensation programs are shifting to address changing market dynamics and mitigate the financial implications of COVID-19. Considering the current impact of the pandemic, the 2020 survey benchmarks represent the best data reference point for use in the near future.

Organizations have been impacted by the pandemic to varying degrees, so it is important that each organization analyzes their unique circumstances when utilizing this market data. Applying a holistic approach will allow each organization to consider future changes that are the best fit for their situation rather than an industry best practice.

SullivanCotter’s 2020 Health Care Staff Compensation Survey contains data from nearly 1,200 organizations on approximately 1,194,900 individual employees.

The 2021 survey is now open for participation!

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Implementing a Job Architecture

Getting the Most from Your Human Capital Management System

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A Time of Transformation

Due to the evolving COVID-19 pandemic, hospitals and health systems nationwide continue to navigate a number of financial and workforce challenges. As organizations make plans for financial recovery and operational transformation, there is no doubt that the health care industry is in the midst of significant change. At present, there are many views on the form this transformation may take. Recent news articles and interviews with health system executives suggest a myriad of approaches are likely to be taken during such an unprecedented time:

  • Reducing and/or reallocating certain resources to optimize the workforce
  • Streamlining management structures
  • Accelerating mergers and acquisitions
  • Restructuring/centralizing administrative and patient care services to facilitate innovation and deployment
  • Standardizing processes to more clearly define roles and responsibilities
  • Diversifying health systems through continued entry into adjacent enterprises such as health plans and technology solutions
  • Reimagining and accelerating the delivery of care in ambulatory settings and virtually
  • Broadening skill sets to facilitate flexible deployment and re-deployment of certain workforces in times of change and/or crisis

Although this journey will look different depending on the unique needs and circumstances of individual organizations, change is well underway. Though the health care industry has been evolving for a number of years, COVID-19 has made the need for transformation more urgent and, in some cases, greatly affected the trajectory of the transformation.

Technology and Transformation

To facilitate transformation, many health care organizations are beginning to migrate from on-premise Enterprise Resource Planning (ERP) and Human Capital Management (HCM) systems to cloud-based platforms from organizations such as Workday, SAP, and Oracle/PeopleSoft.1

While the transition has been slow, the need for greater workforce optimization and enhanced processes along with the growing obsolescence of on-premise systems triggered this migration. Organizations making the investment in a cloud-based system report that they are looking to:2

  • Enhance critical workforce insights through real-time reporting and analytics to facilitate workforce optimization
  • Improve administrative processes and implement best practices to allow functions such as finance, supply chain management and human resources to be more strategic
  • Align operations around a single system – eliminating a number of disparate applications
  • Streamline transactions as it relates to mergers, acquisitions and organizational restructuring
  • Integrate a variety of information sources to enhance data integrity
  • Secure best-in-class manager and employee self-service capabilities
  • Support compliance and mitigate risk
  • Reduce variability of practices across the organization

At a time when hospitals and health systems are looking to restructure, diversify and transform, it may seem counterintuitive to suggest that ERP and HCM systems will be a key part of an organization’s transformation strategy. However, David Chou, a prominent health care technology executive and consultant, indicates that “healthcare provider institutions must begin aggressive ERP initiatives” going into 2021 if they want to remain competitive.3 He notes that many on-premise systems are being sunset as the need to enhance the efficiency of administrative processes is long overdue. Health care organizations have only two choices – carry on with costly and inefficient processes or finally make the investment in ERP and HCM technology to optimize and align operations.

For those who play a critical role in managing the health care workforce, the most important component of an ERP system is its HCM module. An HCM system is essentially a database and group of applications that helps to facilitate the management of an organization’s workforce. This often includes compensation, recruitment, learning and development, performance management and payroll functionality. It can either stand alone or be implemented as part of a broader ERP system.

Implementing a Human Capital Management System

Unfortunately, surveys indicate that nearly half of ERP projects fail to achieve the desired outcomes or run over budget and past deadline.4 While there are a number of reasons for these implementation challenges – the most prominent one is that many organizations are simply not ready or properly prepared.

A successful implementation requires much more than just the technology. Critical to the process is a need for well-defined goals, strong commitment from management and other key stakeholders, depth and breadth of expertise on the project team, open communication and the dedication to instill change.

Also very important, but often overlooked, is the need to have clearly defined processes and structures prior to implementation. Foremost, there is little value in implementing structures and processes that are not fully aligned with an organization’s strategy. Additionally, with the tight timeframes often set by organizations and their deployment partners, there is usually little choice but to do what is known as a “lift and shift”. This refers to organizations utilizing their current processes and simply reimplementing those practices into the new technology platform.

This poses a unique challenge for health systems as few organizations begin the deployment with best practices in place. In fact, many utilize a number of disparate processes, structures and tools to manage human capital. So not only have they failed to implement best practices, they currently have few system-wide practices in place.

A comprehensive review of SullivanCotter’s Workforce Insights360™ database, which contains related information from nearly 40 contributing hospitals and health systems, shows that:

  • Approximately 25% of organizations have more than 1,900 job titles and have just 5 employees per job title – this number is even less if you exclude nursing and service line jobs.
  • From CEO to first line supervisor, the median number of organizational levels is 8. The median number of management job levels is 15 – which includes almost 2 management job levels per organizational level.
  • Moreover, 25% of organizations have 20 or more job levels from CEO to supervisor. This level of granularity explains why many organizations have difficulty differentiating management titles and far exceeds the one-to-one relationship between job titles and organizational levels common in other industries.
  • In regards to reporting relationships and the restructuring around functional lines, only about 60% of human resources and finance employees report up through the CHRO or CFO hierarchy. For a quarter of the organizations, this number was less than 50%. This suggests that health care organizations remain largely decentralized when it comes to support functions.

While an HCM system can be implemented without aligning important processes and structures, failure to do so prior to or in conjunction with HCM system deployment often leads to sub-optimal outcomes. Not only is the organization failing to secure the type of transformational change that was likely an important reason for the initial investment in a cloud-based HCM system, but the functionality they are getting as a result is often sub-optimal.

Although highly recommended as an important best practice, it may not be feasible for some organizations implementing an HCM system to have all their processes and structures harmonized and defined at the outset. The implementation of an HCM system is a journey that provides the ability to strengthen and refine current processes and structures or develop new ones.

However, there is one area that all organizations should prioritize – their job architectures.

The Importance of a Job Architecture

Job architecture refers to an organization’s framework for defining and cataloging jobs – the output of which is its library of jobs.

For many HCM systems, the job architecture and database are the hub around which critical functionality is built.

Studies show that 75% of organizations that have implemented a new cloud-based HCM system have also developed a new job architecture before, during or after deployment.5 This not only reinforces how critical a well-defined job architecture is to this process, but also highlights the fact that most organizations do not already have the appropriate structures in place to maximize value from the deployment of a new HCM system.

How an organization defines the job architecture influences how many jobs it has and how the roles are defined. It will affect what type of reporting and analytics are available and how workforce data is accessed by executives, managers and employees. It will also impact how human resources programs are designed or can be deployed. The structure of this database and its content are critical to optimizing the functionality of an HCM system.

The table below reflects the type of information frequently housed in this database and its linkage to important human resources processes:

To optimize the deployment and eventual utilization of the job catalog within a cloud-based HCM system, organizations must consider the following:

1. Cloud-based HCM systems are configurable – not customizable

Hospitals and health systems coming from an on-premise environment are accustomed to doing just about anything they want. When developing new attributes, for instance, they often write elaborate scripts to create custom workarounds. Cloud-based platforms are not intended to work this way, however. They are built upon best practices that the technology provider applies to all users and work best when one understands their parameters and builds their job architecture and job content around those parameters.

2. Manager and employee self-service requires consistency and ease-of-use

Several HCM systems highlight manager and employee self-service as a cornerstone in their value proposition. This creates a challenge for organizations that lack transparency in their job architecture and compensation programs.

If these self-service capabilities are enabled:

  • A simple and intuitive organizing principle must be developed so managers and employees can search, query and request reports
  • Inconsistencies should be resolved to eliminate any potential confusion and enhance the usability of the information
  • Content must be widely available and regularly maintained to allow managers and employees to make appropriate decisions within a self-service environment

Organizations implementing a cloud-based HCM system with manager and employee self-service capabilities would be wise to resolve all of these challenges before going live to help ensure the organization can “hit the ground running.”

Timing

If a redesign of an organization’s job architecture is required, it is best to do so before undertaking the HCM system deployment. However, if that is not feasible, developing a new job architecture concurrent with the implementation work is possible and can be done without negatively impacting the implementation schedule.

Organizations that decide to do this should consider the following:

  1. Build your project plan around the milestone dates provided by your deployment partner. These are generally nonnegotiable as the deployment costs are based on meeting these deadlines and any work needs to be completed within this timeframe.
  2. Consider adopting an established job framework. This will help to ensure alignment with the market, reduce the time required to develop the job architecture, and decrease the burden on the human resources team.
  3. Prioritize the work and focus only on what is necessary to accomplish before going live.

For organizations that have already implemented a new HCM system and are seeing the consequences of not having harmonized or rationalized job structures, it can be difficult to know when to do the work. There may be fatigue from having recently gone through a large HCM system implementation or unease regarding additional change. Both are reasonable concerns. If significant change is not possible, organizations may consider modifying the attributes used to organize jobs in the HCM system rather than completely restructuring the job framework and compensation systems. While more significant action may be necessary in the long-term, small or modest changes in the structure of the job catalog can enhance value and functionality.

Conclusion

While some organizations may decide to implement a new cloud-based HCM system simply because they are phasing out their current platforms, most who embark on this journey are looking to secure greater insights in order to optimize their workforces, improve critical support functions and enhance organizational efficiency. Ensuring that best practices, effective internal structures, and technology-enabled processes are in place is the surest path to success.


1As Healthcare Turns to ERP, It Also Turns to the Cloud, Brian Eastwood, HealthTech, November 9, 2018.
2Getting the Most from Workday: It’s Not Just About Configuration. Darrell Cira and Susan Lokker, WorldatWork Training Course, October 2017.
3Don’t Sleep. Healthcare CIOs Must Step Into 2021 Now. David Chou, Forbes, May 21, 2020.
4ERP Software: Facts and Stats, Elizabeth Quirk, ERP Solutions Review, April 18, 2019.
5Hidden Challenges of Implementing a New HRIS on the Total Rewards Function. Darrell Cira, Rob Heir, Patrick Bostrom, Steven Seykora, Presentation at WorldatWork National Conference, May, 2015.


PRESS RELEASE | SullivanCotter Launches Suite of Health Care Benchmarking Solutions

SullivanCotter Launches Innovative Suite of Products to Help Benchmark Health Care Workforce Compensation and Clinical Productivity

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July 30, 2020 – Chicago – SullivanCotter, the nation's leading independent consulting firm in the assessment and development of total rewards programs and workforce solutions for the health care industry and not-for-profit sector, is pleased to announce the launch of Benchmarks360TM. Powered by SullivanCotter's proprietary survey data and research, Benchmarks360TM is a suite of intelligent, web-based products that enables health care organizations to analyze and visualize workforce compensation and clinical productivity.

Designed to address enterprise-wide benchmarking needs for employees at all levels – including executives, physicians, advanced practice providers and other clinical and non-clinical staff positions – Benchmarks360TM provides critical industry-leading data, analyses and reporting to support the compensation decision-making process in an increasingly complex operating environment.

"Amidst a rapidly evolving global pandemic, hospitals and health systems are struggling to navigate a number of unprecedented financial and workforce challenges. Strengthening compensation practices and clinical workforce productivity through unique, data-driven intelligence and insights can help to support long-term sustainability in today's ever-changing marketplace. With the ability to conduct a wide variety of quantitative reviews and custom benchmarking analyses, Benchmarks360TM allows organizations to interactively assess clinical productivity and changes in compensation against national market data," said David Schwietz, Chief Information Officer, SullivanCotter.

As one of the most comprehensive products of its kind, it includes two distinct modules to help balance pay and clinical productivity across the organization:

Workforce Compensation and Clinical Productivity Manager

Compare your organization's compensation and clinical productivity benchmarks to the nation's largest health systems and medical groups. Utilize SullivanCotter's proprietary benchmarking information, representing over one million total incumbents, along with other third-party data sources. This module comes in both a Standard (offered with the purchase of SullivanCotter survey data) and a Pro version (upgrade available for additional licensing fee).

Clinical CPT Manager

Analyze and measure your organization's Current Procedural Terminology (CPT) coding distribution against national physician and advanced practice provider clinical benchmarks at the specialty, work RVU and CPT level. This module can be purchased and added separately.

Benchmarks360TM is offered exclusively to organizations who purchase SullivanCotter survey reports. To learn more, including important licensing information and a full list of features and functionality, visit sullivancotter.com/benchmarks360 or call 888.739.7039.

About SullivanCotter

SullivanCotter partners with health care and other not-for-profit organizations to understand what drives performance and improve outcomes through the development and implementation of integrated workforce strategies. Using our time-tested methodologies and industry-leading research and information, we provide data-driven insights and expertise to help organizations align business strategy and performance objectives – enabling our clients to deliver on their mission, vision and values.


PRESS RELEASE | Darrell J. Cira Joins Employee Workforce Practice

SullivanCotter Welcomes Nationally Recognized Workforce Rewards
and Career Frameworks Consultant

July 21, 2020 – Chicago – SullivanCotter, the nation’s leading independent consulting firm in the assessment and development of total rewards programs and workforce solutions for the health care industry and not-for-profit sector, is pleased to announce the addition of Darrell J. Cira, Principal, to the firm's growing Employee Workforce Practice.

With over 25 years of experience advising large and operationally complex organizations outside of and within health care, pharmaceuticals and other life science industries, Darrell is a nationally recognized workforce rewards and career frameworks thought leader and consultant.

Serving as a trusted partner for hospitals and health systems nationwide, Darrell specializes in the design of broad-based employee total rewards programs and talent development strategies to help organizations grow sustainably, achieve key goals and drive performance.

"The industry continues to face unprecedented financial and workforce challenges due to the COVID-19 pandemic, and many organizations are re-evaluating certain policies and practices in light of these recent events. Developing enterprise-wide rewards philosophy, career architecture and compensation frameworks to maintain employee engagement, manage costs and ensure future sustainability is now more critical than ever. Leveraging many years of direct experience within both general industry and health care, Darrell will work with clients to devise and implement strategic workforce programs as the health care industry makes plans for financial recovery and operational transformation," said Ted Chien, President and Chief Executive Officer, SullivanCotter.

Darrell also has an extensive range of additional expertise that will help him to provide greater value for clients in a rapidly evolving health care environment. This includes creating job and compensation infrastructures in the context of today's cloud-based human capital management systems, managing complex compensation plan integrations for a variety of mergers and acquisitions, and conducting pay equity analysis and implementing programs to help address related issues and discrepancies.

Prior to joining SullivanCotter, Darrell spent many years as a partner at a large global consulting firm where he led a number of critical workforce rewards and talent management initiatives.

About SullivanCotter

SullivanCotter partners with health care and other not-for-profit organizations to understand what drives performance and improve outcomes through the development and implementation of integrated workforce strategies. Using our time-tested methodologies and industry-leading research and information, we provide data-driven insights and expertise to help organizations align business strategy and performance objectives – enabling our clients to deliver on their mission, vision and values.

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WEBINAR RECORDING | COVID-19: Managing Human Capital and Ensuring Sustainability

Hosted by the Health Forum/American Hospital Association

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Hospitals and health care systems across the United States face significant financial and workforce challenges resulting from the COVID-19 pandemic. As this situation continues to evolve, organizations will need to review compensation-related practices across their workforce to identify modifications required to support changes in deployment and organizational sustainability while also ensuring the wellbeing of employees and patients.

In this webinar, you’ll learn how health care organizations are adjusting their compensation practices and human capital strategies in response to COVID-19. We will present data from recent SullivanCotter research highlighting the impact of COVID-19 on related practices for executives, physicians, advanced practice providers (APPs) and other health care employees. We will also share SullivanCotter’s interpretation regarding how the human capital landscape may change key components of talent management and total rewards after the crisis subsides.

This session includes a discussion of:

  • Emerging workforce compensation practices that organizations have implemented or are considering implementing to help address the financial and operational issues related to COVID-19
  • Specific practices for physicians and APPs, such as premium pay for those on the front lines, salary guarantees for other providers, paid time off (PTO), redeployment, extra shifts and more
  • Specific practices for executives and other employees, such as emergency PTO, premium pay, deferring salary increases or implementing temporary reductions, revisiting incentive plans to reflect current situation, re-evaluating retention incentives and more
  • How changes in the regulatory landscape have already impacted or may impact decision-making around compensation practices
  • What the post-COVID-19 human capital landscape may look like

Navigating the Uncertainty of COVID-19

Considerations for the Not-for-Profit Board Compensation Committee

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The COVID-19 pandemic is impacting the not-for-profit sector in a myriad of ways. The crisis is placing an enormous strain on both financial and workforce resources by creating uncertainty on current/future revenue, employee safety and job security.

The Board Compensation Committee serves a critical governance role in organizational efforts to navigate uncertainty by advising management on talent risks, supporting a focus on the key success factors to survive and recover from this crisis, and ensuring that the executive compensation program reflects best market and governance practices.

In this article, SullivanCotter addresses some of the compensation-related issues these organizations are facing and provides a number of guiding principles for the Compensation Committee during this unprecedented time.


INFOGRAPHIC | COVID-19 Executive and Employee Compensation Practices Survey

August 2020 - Market Response to COVID-19: Executive and Employee Compensation

In response to COVID-19, hospitals and health systems have taken various actions related to compensation and workforce practices to help mitigate certain financial challenges and plan for the “new normal.” As the pandemic continues, organizations are starting to revert to pre-COVID-19 compensation levels while at the same time preparing for potential future surges by building a more flexible workforce.

SullivanCotter’s COVID-19 Executive and Employee Compensation Practices Survey series, which includes data from 108 hospitals and health systems, highlights the compensation and workforce-related actions organizations have implemented or are considering.

We expect that workforce practices will continue to evolve as the calendar year-end approaches and organizations begin planning for 2021. In order to keep health care organizations up to date on emerging trends related to COVID-19, we will monitor developments in real time.

Please note: Data reflect responses as of August 13 - 20, 2020.

You can also view the May and April data as a point of comparison.

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INFOGRAPHIC | 2019 Health Care Staff Compensation Survey

Insight into compensation and pay practices for key health care staff positions

In an increasingly competitive marketplace for talent, health care organizations must balance the need to manage labor expense with the ability to effectively recruit, retain and engage key staff positions.

Learn more about emerging market trends in base salary, total cash compensation and pay practices from SullivanCotter’s 2019 Health Care Staff Compensation Survey – featuring critical benchmarking data from more than 600 organizations on over 450 different administrative, nursing, professional, supervisory and management positions.

Don't miss your chance to participate. The 2020 survey is now open!

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Financial Investment News | Study Reveals Compensation Levels for Nonprofit Investment Staff

Driven by the demand for talent across the not-for-profit sector

In a recent article from Financial Investment News, SullivanCotter discusses how performance-based compensation continues to be a key component of pay for investment staff at private foundations and university endowments. The article features new data from SullivanCotter's 2019 Endowment and Foundation Investment Staff Survey as well as insights from Not-for-Profit Practice Director Nanci Hibschman.

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INFOGRAPHIC | 2018 Health Care Staff Compensation Survey

Focusing on compensation and pay practices across the entire health care organization

Health care continues to evolve at a rapid pace, and organizations must balance the need to manage labor expense with the ability to compete and perform in an increasingly competitive talent market. This requires greater focus on compensation and pay practices across the entire health care workforce, including not just executives and providers but staff and other professionals in administrative, nursing, service and supervisory roles as well.

View highlights from SullivanCotter's 2018 Health Care Staff Compensation Survey, featuring data from nearly 600 organizations on 58,000 different health care professionals.

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Fundraising Talent Strategy in 2018 and Beyond

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Attract and retain high-performing fundraising professionals

As the saying goes, you need money to have a mission. Whether through in-kind donations or the receipt of funds from public or private sources, most not-for-profit organizations rely to some degree on philanthropy to obtain the funds needed to sustain their mission.

For some not-for-profits, the fundraising professionals vital to this process are considered the lifeblood of the organization, and the loss of key talent could mean a loss of momentum and/or continuity in donor relationships. In today’s environment, these organizations are also faced with the decline of both governmental and non-governmental funding sources and, in the wake of the Tax Cuts and Jobs Act (which doubled the standard deduction and will result in fewer itemized returns through which tax-deductible donations are claimed), a reduced incentive to donate. Attracting and retaining people with the critical skill set to perform fundraising successfully has become arduous as not-for-profit organizations face these realities, along with costs of replacing talent as high as 100% of salary in as often as every 18 months.

In developing a fundraising talent strategy for this year and beyond, consider proactive strategies to attract and retain high-performing and high-potential professionals, while also enhancing the capabilities of existing staff. Immediate efforts should focus on:

Auditing the skills and capabilities of the existing team

Complete a skills assessment to ensure the development office includes the types and number of staff necessary to achieve its goals. These types of assessments often reveal the need for:

  • Different or additional leadership with the ability to cultivate meaningful relationships among donors and the leadership skills to grow and develop talent. Accomplished fundraising professionals will be drawn to and remain at an organization where leadership in this area is strongest.
  • Innovative donor research capabilities and advanced donor analytics to ensure effective data mining. These skill sets can be developed in-house or outsourced.
  • Advanced social media expertise. Branding and marketing in the era of social media presents increasingly sophisticated and unique ways to share the organization’s mission with potential donors. Ensure the right resources are in place to keep pace with the market.

Evaluating and expanding recruiting practices

Changes may not be needed for organizations that have identified proven strategies to attract top fundraising talent who stay for more than three years. However, it is worth considering that a tighter labor market for fundraising professionals may require a different approach to sourcing talent:

  • For larger organizations, the market for top fundraising executives is primarily national in scope. Other fundraising positions are commonly recruited locally or regionally, though the market segments from which talent are drawn appears to be evolving.
  • Universities that have historically looked only to higher education to draw talent are now recruiting fundraising staff from large health systems. Large health systems, in turn, are now including universities and other organizations—such as large charities—in the search for talent.

Evaluating the effectiveness of the compensation program

This is an important consideration, particularly in an environment where certain organizations have become increasingly aggressive in their efforts to recruit and retain high-caliber fundraising professionals.

An important first step in the evaluation of the program is to identify a compensation strategy that will support the organization’s current and anticipated recruitment, retention and performance objectives. Advanced compensation vehicles such as retention plans and/or deferred compensation arrangements may be needed to maintain a competitive edge in today’s market. Implementing such changes may represent a shift in culture and practice that will need additional socialization and buy-in from key stakeholders.

Providing performance-based pay in the form of incentives is legally permissible and more prevalent than ever. Organizations that offer incentives find that these programs can help to:

  • Motivate people and teams to meet or exceed fundraising targets. This often requires a “both/and” approach of increasing revenue through effective fundraising strategies and operating more efficiently to reduce costs.
  • Improve teamwork and collaboration. In some cases, the introduction of incentives brings a new discipline around fundraising that engages more staff in the development of strategies for securing new donors.
  • Limit the amount of fixed costs. Since incentives are paid only when goals are met or exceeded, including incentives in the mix of pay provides a self-funding feature. From an optics perspective, the organization promotes a performance-based culture and demonstrates the sound management of fixed costs. Incentives are no longer considered lavish or unusual. Rather, they are a necessary component of a well-designed compensation strategy.
  • Reinforce a culture of performance and accountability. The plan will be most effective when all team members are held to rigorous goals, develop strategies and operating plans by which to meet them, and work together to accomplish results.
  • Address gaps in performance areas. After conducting a performance benchmarking study to identify gaps that may exist with respect to various fundraising targets (e.g., total funds raised, number of donors, transformational gifts received, cost per dollar raised), incentives can redirect efforts to fill those gaps.

Increase the focus on — and funding of — talent development strategies

Many organizations provide only basic opportunities for growth and limit talent development budgets in the spirit of cost-saving. By increasing the dollars allocated to skills building and the professional development of fundraising talent, the return on investment can be multifold and differentiate an organization in the minds of prospective and current development staff.


A thoughtful and disciplined approach to the activities outlined above can lead to dramatically improved attraction and retention in a highly-competitive market for fundraising talent. When deploying any new strategy, the key to a successful outcome lies in the design, implementation and communication efforts surrounding the strategy. In advance of proposing modifications to a current approach, traditional wisdom applies: include key stakeholders in the process, consider both current- and future-state needs as plans are developed, and assess the impact of any anticipated program changes. Ultimately, a program that successfully attracts and retains fundraising talent is one that is marketcompetitive, cost-effective, engaging and reinforced as a strategic differentiator for talent both inside and outside of the organization.

 


Alex Barker, Principal, Joins SullivanCotter's Employee Workforce Practice

Jan. 18, 2018 – Minneapolis – SullivanCotter, the nation’s leading independent consulting firm in the assessment and development of total rewards programs and workforce solutions for the health care industry and not-for-profit sector, welcomes Alex Barker, Principal, to the firm’s Employee Workforce Practice.

Alex is an innovative industry leader with more than 20 years of experience in the strategic management of health care operations. Having held leadership positions at some of the nation’s largest hospitals and health systems, Alex is well-positioned to help clients navigate the rapidly changing health care environment as payment models evolve and organizations take on more risk. With direct insight into how large and operationally complex organizations are aligning their compensation and benefits programs as the industry continues its shift from volume to value, Alex specializes in the development of integrated total reward programs for employees at all levels.

“With strategic, value-based goals such as improved quality, access, service and affordability, organizations must look beyond physicians as the only drivers of clinical performance. Understanding how to better support key organizational goals across all segments of the health care workforce is critical. Alex’s unique combination of experience in the executive, provider and employee workforces is rare, and will be a great asset to our clients as they look to implement a more holistic approach to aligning compensation and performance across the board,” said Ted Chien, President and CEO, SullivanCotter.

Alex also has an impressive range of additional experience that will help him to better assist clients, including governance, operational due diligence, post-merger integration and alignment, workforce resource planning and recruitment, onboarding and retention strategy.

Alex joins the firm from his previous role as a Senior Client Partner in Korn Ferry Hay Group’s Physician Compensation and Governance Practice. Prior to this, he served as the VP of Compensation, Benefits and Physician Services at Lahey Health, where he was responsible for managing both provider and non-provider total reward programs for the entire system.

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Aligning Pay With Performance in Endowment Incentive Plans

Incentive compensation plans in endowment investment offices are designed to fulfill a number of important objectives—the most significant of which is to ensure the alignment of pay with investment staff performance. As investment returns are published and closely evaluated by stakeholders, the media and other constituents, it is essential for boards and management to establish an appropriate correlation between pay and performance and to ensure that the design of the incentive program is both successful and defensible. Endowments should regularly assess the programs in place to determine whether incentive pay and investment performance properly align with the organization’s objectives, appropriately reflect the changing marketplace, and successfully deliver both competitive and reasonable compensation to investment staff.

Understanding Market Practices

While the prevalence of incentive compensation arrangements in endowment investment offices has steadied over the past decade, it remains high. In the Endowment and Foundation Investment Staff Compensation Survey, SullivanCotter conducts an annual assessment of key investment staff positions among leading colleges and universities, private foundations and other not-for-profit organizations. The 2015 report found that 98% of organizations with assets under management of greater than $1 billion offer incentive compensation to investment staff. For the Chief Investment Officer (CIO), incentive pay represents an average of 43% of total cash compensation.


 

98% of organizations with assets under management of greater than $1 billion offer incentive compensation to investment staff

Endowment graph 1

 

 


1 The term “endowment investment office” for the purpose of this article is defined as the investment team or group managing the endowment of a university, foundation or other not-for-profit organization.

 

Other key findings from the survey indicate that incentive compensation is largely based on investment performance relative to the organization’s policy portfolio benchmark, with 88% of organizations having reported this. On average, this represents 71% of the overall incentive award for the CIO. Measurement is typically done on a relative basis because it gauges the performance of actively managed funds that are expected to see a return greater than that of the market. Endowment investment staff seek to outperform the market, whether that means higher returns in a bull market or fewer losses in a bear market.

Absolute return measures, such as measuring the total portfolio return without regard to any external benchmarks, are only used in 21% of incentive plans and represent a minority weighting in determining the total incentive award. Absolute return alone does little to explain other key factors that influence how well an endowment performs: where the funds are currently invested, the board-mandated risk profile, and the investment policy and objectives of the endowment as a whole. Peer group measures, where an organization’s returns are compared to a group of specific peer organizations, have fallen out of favor over the last decade and continue to decrease in prevalence. On average, 37% of organizations currently have a peer group measure in place, and this is often weighted no more than 25% of the overall award. Although this approach provides a secondary metric to evaluate investment performance, it too evaluates absolute performance without consideration of the endowment’s specific investment policy portfolio benchmark and objectives.

A comparison of published investment returns to a CIO’s total cash compensation is not a good indication of whether or not an organization is rewarding for performance. For example, one organization may report lower published investment returns because its policy objective is to maintain stable growth in the portfolio, yet its funds are significant in value and managed by a seasoned and high performing CIO. In the case of negative investment returns, CIOs may earn performancebased incentive awards even when the overall endowment fund does not yield positive returns as a result of market conditions. In this circumstance, the CIO may be rewarded for decisions to help preserve capital, protecting the endowment from greater loss. Additionally, 48% of investment offices required some percentage of the incentive award to be deferred. The amount truly earned in a given performance period cannot be discerned from publicly available documents, as payout amounts reported may reflect partial earnings from the current year as well as awards that had previously been deferred.

Assessing plan effectiveness

By regularly assessing your endowment’s incentive compensation plan, your organization can ensure that investment staff pay is properly aligned with performance. The following best practices are key assessment factors to consider in the incentive compensation decision-making process:

Endowment graph 2

 

  • Consistency with the compensation philosophy. Review the plan design in light of the organization’s compensation philosophy of how competitive to be and with whom. For example, if the organization intends to compensate staff at the median of the market with target levels of performance, a review of the plan design and current compensation levels will indicate whether the existing program is aligned with the stated philosophy.
  • Appropriate peer group definition. The peer organizations against which compensation levels and pay practices are compared is critical. Recent scrutiny by the IRS and other regulators has been focused on peer group composition, and aspirational peer groups (those that represent a desired future state, such as endowments with significantly larger assets under management) are difficult to defend. It is important to ensure that peers reflect the organization’s current size, portfolio strategy and complexity, and not what the organization expects or hopes to look like in 10 years.
  • Alignment with investment objectives. The metrics used and the period of time over which performance is measured should reflect the organization’s investment objectives. For this reason, less than 10% of organizations measure performance over a one-year period. Most plans (82%) measure performance over a three-year period to balance a longer term time horizon with the reality of line-of sight, investment staff tenure and the ease with which new hires can be incorporated into the plan.
  • Mitigation of risk. How awards are interpolated (or not), capped and set relative to one another are important considerations for the mitigation of risk. For example, placing too much pay at risk can place a significant amount of pressure on the participants to deliver expected outcomes. This pressure may consciously or unconsciously affect decision-making.
  • Effective investment performance measures. An effective incentive plan will have measures that staff can directly affect, such as performance relative to the policy benchmark. Incorporation of metrics over which investment staff may not have control or influence, such as absolute return or peer group measures, may lead to unintended behavioral consequences and affect the competitiveness of the plan.
  • Evaluation of performance in multiple contexts. Incorporating the measurement and reward of individual contributions or the ability to qualitatively evaluate performance on both the overall organizational and individual level is an effective way to ensure that performance is evaluated and rewarded in multiple contexts. These contributions may include the successful leadership of staff in a particularly challenging economic environment, completion of an asset allocation study, or major rebalancing effort. This can provide a reference to not only what gets done but also to how.
  • The use of credible benchmarking data. Quantitative plans based predominantly on investment metrics with a capped incentive opportunity have a greater chance of passing the test for reasonableness. Utilizing credible survey data is key in knowing where to set these caps. Custom peer groups can be helpful, but should represent a robust and appropriately broad sampling of the relevant talent market. In addition, multiple survey sources should be utilized whenever possible.

Process is Important

Aligning pay with performance for endowment investment staff and ensuring that the correlation is defensible requires a process of due diligence through board and management oversight and good governance of the compensation decision-making process. A regular assessment of incentive programs as well as a strong partnership between the Investment and/or compensation committee, management, and a qualified independent consultant is critical to the overall success and reasonableness of incentive compensation design.

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